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Market Update

Tsys slightly higher, US 10Y 2.276%, curve flatter, prices bid in Asia on Moody’s China downgrade. In Europe EGBs rose after good German auction. FOMC minutes the main focus for tsys this aft. GOCs higher, outperforming tsys by ~1bp before the BOC this  at 10:00am not expecting any changes, mkts still expect next move to be a rate hike – yet odds have faded appreciably over the past month. Busy day for corp issuance yest – CNQ issued USD$3bln across 5,10 & 30Y tranches – US$1bn 5yr at T+115bp, US$1.25bn 10yr at T+160bp , US$750m 30yr at T+200bp – 25-30 bps tighter than IPT! (140,185bp ,230bp). CNQ also priced CAD $1.8bln in  June 20s, Dec 26s & May 37s @ 125, 200.5 & 270.  GM Finance issued $400mln 5Y @ 162, Manulife Bank priced $500mln 5Y dep note @ 106.8 or ~25 over bank dep notes.  Provis tighter again yest despite the heavy corp supply & lower cda yields, Ont 27s 73.5/73 back to the lows of April, Ont 48s 83.5 vs 88.5 last week and the Ont 48/27 curve 0.5bps flatter as well indicating strong demand for long term provis.

News headlines 

Stocks, Currencies Hit Pause on Wait for Fed Clues: Markets Wrap (Bloomberg) European stocks struggled to maintain gains and U.S. equity futures and the dollar both traded sideways as investors awaited fresh insight from the Fed on the path for borrowing costs in the world’s biggest economy. China’s credit-rating downgrade sank industrial metals.

Moody’s downgrades China, warns of fading financial strength as debt mounts (Reuters) Moody’s Investors Service downgraded China’s credit ratings on Wednesday for the first time in nearly 30 years, saying it expects the financial strength of the economy will erode in coming years as growth slows and debt continues to rise.

OPEC Wants to Carry on Pumping Less and Earning More (Bloomberg) At first glance, OPEC’s cuts haven’t worked — global oil inventories remain well above normal levels. But the policy’s made a difference where it really counts: juicing the coffers of finance ministries from Baghdad to Caracas.

U.S. rate hike in June ‘a distinct possibility’ -Fed’s Harker (Reuters) A U.S. interest rate hike next month is a “distinct possibility,” the head of the Federal Reserve Bank of Philadelphia said on Tuesday, adding that another disappointing reading on monthly inflation could cause the U.S. central bank to hold back.

Shell to sell $4.1-billion stake in Canadian Natural (TheGlobeAndMail) Royal Dutch Shell Plc has decided to offload a roughly $4.1-billion stake in Canadian Natural Resources Ltd (CNRL) that it acquired as part of a deal to retreat from Canada’s oil sands earlier this year, people familiar with the situation told Reuters.

BMO hikes dividend as earnings rise to $1.25 billion (FinancialPost) The Bank of Montreal had $1.25 billion of net income in its second quarter. That’s up 28 per cent from $973 million during the same period last year. Revenue was $5.74 billion, up from $5.10 billion a year ago.

Overnight markets 

Overview: US 10yr note futures are up 0.037% at 125-29, S&P 500 futures are up 0.04% at 2399, Crude oil futures are down -0.37% at $51.28, Gold futures are down -0.22% at $1252.7, DXY is down -0.04% at 97.312, CAD/USD is down -0.04% at 0.7404.

US Economic Data

Canadian Economic Data 

Disclosure and Disclaimer

The following sources of information have been, or may have been, used partially or in their entirety to compile the herein provided CTI Capital Securities Inc. (“CTI Capital”) ‘Morning Comments.’ CTI Capital believes these sources to be generally reliable, however, as said sources are varied and from third parties, CTI Capital cannot guarantee the accuracy or completeness of said information: Canadian Press (CP); Bloomberg News (BN); Wall Street Journal (WSJ); Stone & McCarthy Research Associates (SMRA); New York Times (NYT); Financial Times (FT); Market News International (MNI); Globe and Mail; Associated Press (AP); CNW Group (CNW); Reuters; Business News Network (BNN); Market Watch; and others.

Ivan Greenstein, Stephan Buu, David Leclair-Legault

Institutional Bond and Equity Desk
CTI Capital Valeurs Mobilières Inc.

Tel : (514)-861-0240
Fax: (514)-861-3230

Market Update

Tsys trading higher, yields 1bp lower with the US 10Y 2.243 (-1.1bps), higher than avg volume in TY futures.  Tsy, EGB yields fell initially o/n on news of terrorist attack in UK, then gave much of it back after firm eco data & sov supply.  German IFO rose to the highest since 1991 in May while German Man PMI rose to 59.4 in May. GOCs higher, 10Y 1.46%, outperforming tsys in 10s & longs. Provi spds narrowed ~3bps last week , most of that on announcement of the Muskrat Falls deal. All in yields on provis lower by 12-15bps last week. CNQ (Baa3/BBB+) in the US mkt with benchmark 5,10 & 30Y – IPT 140,185 & 230. The CAD CNQ 22s @ 140 swap to USD @ tsys + 130 – so this looks to be 10bps concession for the 5Y.

News headlines

European Stocks Gain on Solid Data; Crude Retreats: Markets Wrap (Bloomberg) European stocks advanced as data from Germany and France signaled that the region’s economic recovery remains on track. U.K. assets showed resilience in the wake of a suicide bomb attack.

Oil prices fall on White House proposal to sell U.S. oil reserves (Reuters) Oil prices fell on Tuesday, weighed down by U.S. President Donald Trump’s plan to sell off half the country’s huge oil stockpile, threatening a future glut even as OPEC and its allies cut output to try and tighten the market.

China to open more sectors to foreign investors (Reuters) China will further open its economy to foreign investors, through measures such as allowing investment in more industries, such as services, state television said on Tuesday, citing a reform group meeting chaired by President Xi Jinping.

OPEC set to prolong oil cuts as delegates predict smooth meeting (Reuters) OPEC will likely agree to extend production cuts for another nine months, delegates said on Tuesday as the oil producer group meets this week to debate how to tackle a global glut of crude.

Bond market braces for impact of New York’s free tuition plan (Reuters) Little known private colleges that are already struggling to grow their revenues are facing a new threat that could further weaken their finances and make borrowing harder: free tuition at public universities.

HSBC Makes a ‘Big Bet’ on Canada in Bid for More Market Share (Bloomberg) HSBC Holdings Plc is getting aggressive in Canada — and one needs to look no further than its latest mortgage rate for proof of broader ambitions. HSBC Canada is offering five-year fixed-term mortgages at 2.39 percent, undercutting the lowest discretionary rates at the largest domestic lenders including Toronto-Dominion Bank and Royal Bank of Canada.

Overnight markets 

Overview: US 10yr note futures are up 0.062% at 126-07, S&P 500 futures are up 0.11% at 2395.5, Crude oil futures are down -0.04% at $51.11, Gold futures are down -0.01% at $1261.3, DXY is down -0.01% at 96.974, CAD/USD is down -0.26% at 0.7425.

US Economic Data

Canadian Economic Data 

Disclosure and Disclaimer

The following sources of information have been, or may have been, used partially or in their entirety to compile the herein provided CTI Capital Securities Inc. (“CTI Capital”) ‘Morning Comments.’ CTI Capital believes these sources to be generally reliable, however, as said sources are varied and from third parties, CTI Capital cannot guarantee the accuracy or completeness of said information: Canadian Press (CP); Bloomberg News (BN); Wall Street Journal (WSJ); Stone & McCarthy Research Associates (SMRA); New York Times (NYT); Financial Times (FT); Market News International (MNI); Globe and Mail; Associated Press (AP); CNW Group (CNW); Reuters; Business News Network (BNN); Market Watch; and others.

Ivan Greenstein, Stephan Buu, David Leclair-Legault

Institutional Bond and Equity Desk
CTI Capital Valeurs Mobilières Inc.

Tel : (514)-861-0240
Fax: (514)-861-3230

Market Update

Tsys trading weaker , curve steeper out to tens, 10Y 2.25% (+2bps), longs outperforming on avg volume in TY futures esp compared to the last couple of days. Euro stocks  higher, S&P mini +5pts, crude +1.2% @ 49.95. Tsys in a narrow range overnite, fading in Europe with EGBs.  10Y bund yield 0.364% (+2.3bps) , rally in peripheral spds continues with rumoured short covering in BTPs and outright buying in cash, 10Y BTP/Bund spd 175bps back to lows of early March. GOCs lower, outperforming after Apr Cdn CPI came in below exp 1.3% vs 1.4% in the core, 10Y 1.46%. Longs seeing good support all week, 10s30s 4bps flatter since the long auction wed on rumoured foreign buying, long rolls also flatter. Provis well bid since yest morning Ont 48 deal @ 88.5, which closed 85.5 bid on news Muskrat Falls had been assigned a AAA rating from Moodys. This morning spds  are in another 0.5-1bps.  In corps, weve seen demand for ABIBB & AT&T 7Y maples this week, the latter vs deposit notes. Enbridge in the mkt with a 2Y FRn @ CDOR + 59bps.

News headlines 

Stocks Steady After Volatile Week; Crude Rises: Markets Wrap (Bloomberg) Global equities showed signs of stabilizing at the end of a turbulent week in which investors confronted political crises in Washington and Brazil. Oil headed for a second weekly gain as OPEC members supported Saudi Arabian and Russian pledges to extend supply cuts.

Oil prices climb on hopes output cuts will be extended (Reuters) Oil futures rose on Friday to the highest in nearly a month on growing optimism that big producing countries will extend output cuts to curb a persistent glut in crude, with key benchmarks heading for a second week of gains.

OPEC Reality: Saudis Delivered, Non-OPEC Didn’t (Bloomberg) Just under a week from now, the Organization of Petroleum Exporting Countries will meet in Vienna to decide whether to extend the first oil production curbs in eight years in order to eliminate a glut. The group will evaluate data, described below, that highlights two key details: First, Saudi Arabia is shouldering much of the burden. Second, non-member producers – who pledged reductions of their own – haven’t delivered in full.

TPP trade deal members seek to move ahead without United States (Reuters) Remaining members of the Trans Pacific Partnership (TPP) free trade agreement are working on a statement to reaffirm their commitment to it despite the withdrawal of the United States, sources close to the discussions said.

ECB cannot ‘run the economy hot’ to create jobs: Coeure (Reuters) The European Central Bank cannot risk running “the economy hot” to support employment once inflation stabilizes at its target of almost 2 percent, ECB Executive Board member Benoit Coeure said on Friday.

Cheap Gas Drilling Rouses Canada’s Permian of the North (Bloomberg) Drilling rigs and roughnecks are hot commodities once again across the Montney shale formation in northern British Columbia and Alberta, and companies like Grimes Well Servicing Ltd. are having a hard time keeping up with demand.

 Overnight markets 

Overview: US 10yr note futures are down -0.049% at 126-07, S&P 500 futures are up 0.29% at 2370.25, Crude oil futures are up 1.48% at $50.08, Gold futures are up 0.03% at $1253.2, DXY is down -0.53% at 97.363, CAD/USD is down -0.16% at 0.7363.

US Economic Data

There is no major economic data release for today.

Canadian Economic Data 

Disclosure and Disclaimer

The following sources of information have been, or may have been, used partially or in their entirety to compile the herein provided CTI Capital Securities Inc. (“CTI Capital”) ‘Morning Comments.’ CTI Capital believes these sources to be generally reliable, however, as said sources are varied and from third parties, CTI Capital cannot guarantee the accuracy or completeness of said information: Canadian Press (CP); Bloomberg News (BN); Wall Street Journal (WSJ); Stone & McCarthy Research Associates (SMRA); New York Times (NYT); Financial Times (FT); Market News International (MNI); Globe and Mail; Associated Press (AP); CNW Group (CNW); Reuters; Business News Network (BNN); Market Watch; and others.

Ivan Greenstein, Stephan Buu, David Leclair-Legault

Institutional Bond and Equity Desk
CTI Capital Valeurs Mobilières Inc.

Tel : (514)-861-0240
Fax: (514)-861-3230